Euro
EUR/GBP: Down from £0.86 to £0.85 EUR/USD: Down from $1.14 to $1.13
The euro got off to a poor start in July, being pressured by some dovish signals from the European Central Bank (ECB).
While subsequent signals from the ECB struck a more hawkish note, the single currency remained pressured by weak Eurozone inflation and concerns over European energy security.
The focus now turns to upcoming Eurozone data, with a particular focus on inflation as EUR investors seek to gauge the odds of the ECB delivering up to two interest rate hikes by the end of the year.
Pound
GBP/EUR: Up from €1.16 to €1.17 GBP/USD: Unchanged at $1.32
The pound got off to a positive start in July, as GBP investors priced out recent UK political risk premium as Keir Starmer’s resignation ended months of speculation over his future.
While Sterling sentiment remained broadly positive as Andy Burnham took office, the honeymoon period didn’t last long, with rising UK borrowing costs and mixed UK economic data curbing demand for the pound in the latter half of the month.
Looking ahead, markets will be keeping a close eye on the correlation between Burnham’s performance and the UK bond market in the coming weeks, with the pound at risk of slipping if any of his fiscal policies alarm bond investors.
US Dollar
USD/GBP: Unchanged at £0.75 USD/EUR: Up from €0.87 to €0.88
The US dollar has traded erratically in recent weeks, with the resumption and subsequent pause of hostilities in the Middle East a major contributing factor.
Mixed US economic indicators, including a lacklustre payroll print and softer-than-forecast inflation, also infused volatility into USD exchange rates throughout July.
A key focus for USD investors in August will be the Federal Reserve’s annual Jackson Hole symposium, where the US central bank may offer more insight into how it may shape monetary policy through the second half of 2026.
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